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Latest Property Sector Updates - Repossession Bans, Stamp Duty Extensions & the Renter's Reform Bill

Latest Property Sector Updates - Repossession Bans, Stamp Duty Extensions & the Renter's Reform Bill
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Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin20 Jan 2021

This week, with so many significant announcements on the property market front, we'll recap the most important new rules, eviction regulations and notices that have landed on our desks!

With the seeming race to the finish at 31st March, and property transactions still piling up at record pace, there is every possibility that new changes will crop up, so feel free to give the Revolution Brokers team a call for the most recent updates from the world of UK property.

Buy to Let Repossession Ban Extensions

First up, the Financial Conduct Authority (FCA) has given some relief to buy to let investors who have been financially impacted by the COVID-19 pandemic and the resultant lockdowns.

As well as rights for tenants, and moratoriums on evictions, investors have struggled with late rent payments, rent holidays, and income losses. Fortunately, most reports indicate that this has been kept to a minimum through communication between landlords and tenants.

This week we heard that buy to let repossessions have been banned for a further two months, currently due to end on 1st April 2021.

The FCA says, 'worsening Coronavirus situation and the government’s tighter Coronavirus-related restrictions which mean that consumers could experience significant harm if forced to move home at this time as a result of repossession proceedings'.

No doubt, this comes as welcome news to investors and tenants who might feel that a challenging situation is putting their security in a precarious position.

London Rental Properties Continue to Face Heavy Demand

While for much of the last ten months we've heard about massive pressure on more rural property areas, the latest figures from Chestertons shows that tenant moves in London soared just before the 2020 Christmas break.

Figures show:

  • December 2020 was one of the busiest months on record.
  • There were 88% more properties available to let.
  • Drops in prices have encouraged more movers to take advantage of lower rates.
  • Rent-free periods incentivised greater take-up in opportunities to upscale.
  • The agency received 69% more tenant enquiries than the year before.

So, what does this tell us? Outside space has become an absolute premium, with so many Londoners having experienced claustrophobic conditions during the repeated lockdowns, and little access to green space and fresh air.

Short-term lets have dropped considerably, primarily due to travel restrictions and the huge dip in the holiday let market - meaning properties previously marketed on Airbnb and similar sites have now been offered for longer-term leases.

Potential for a Stamp Duty Holiday Extension Grows

We've anticipated the Stamp Duty holiday coming to an abrupt end as of 31st March, and until a few days ago, it seemed the most likely outcome, despite the new lockdown imposed from January 2021.

However, the Northern Research Group (NRG) has lobbied the government, with support of over 50 conservative MPs in the region, to extend the holiday for another 12 months.

The media speculates heavily over the chances that Sunak will heed these calls, but the jury is out as of yet whether he is likely to grant the concession.

To add to the build-up, the Sunday Times' political editor wrote last weekend that the chancellor 'is also considering an extension to stamp duty cuts and an increase in benefits'.

For now, this isn't anything concrete, so we'd recommend proceeding with any property purchase plans or investment strategies as you have been, as nobody can yet say with any certainty whether the extension will happen.

The Buy to Let Investment Sector Grows by Almost 25%

Perhaps not surprisingly, the buy to let sector has grown extensively in the last few months - very likely to have been driven by several factors:

  • Tax regime reforms for landlords making it more tax-efficient to manage property portfolios through a limited company than as a private business.
  • Stamp Duty holidays enticing more new investors to the market while savings are available.
  • Investors turning to property as a safer long-term risk-averse strategy, given the volatility of many other markets.

The biggest driver has likely been tax relief changes, which have been being phased in over several years, with the final stage cemented in April 2020.

Landlords were previously able to offset mortgage interest costs against their income, thereby potentially falling into a lower tax bracket for income tax liabilities.

Now, those costs must be claimed as an expense, without impacting the turnover figure, making a significant dent in rental profits across the board.

  • Limited companies can offset 100% of mortgage interest charges against their profit - compared to 20% for private landlords.
  • Additional expenses can also be offset, meaning that there is greater scope to claim tax efficiencies.
  • Mortgage interest rates on commercial borrowing are higher, but business owners may offset these costs with the savings in tax obligations.
  • Landlords with the most to benefit are higher rate taxpayers, and investors with multiple buy to lets.

Adding to this rapid growth area, rentals are also picking up in speed - although London is bucking the trend, being one of the few places to show a decline.

Across the UK, the rental sector grew by 1.4% in October, 3% in November, and 4.1% in December according to research by Hamptons, contrasting with rental income in central London declining by 11.5% year-on-year to December 2020.

Renter's Reform Bill Gets Closer to a Launch Date

Most landlords in the rental sector will be aware of the Renter's Reform Bill, which has been pending for well over a year.

Some of the headline changes include:

  • Removing S21 eviction notices.
  • Introduction of lifetime deposits, which move between properties with the tenant.

Of course, while more protection for tenants is positive, there are concerns about dilapidation repairs, and rent debt which can be a serious business risk for landlords.

While the bill is yet to be debated in the House of Commons, it seems likely that the system will introduce a zero deposit insurance policy, claimable against by the landlord, rather than creating a mobile transfer system for cash-based deposits.

That's our round-up of this week's news; as and when any new announcements are made, we’ll be sure to keep you updated!

For the latest advice and guidance from the Revolution Brokers team of independent mortgage consultants, get in touch with the office to arrange a good time to talk.

Contact us now to discuss your personal options, Revolution Finance Brokers specialise in commercial and residential finance in Essex, Kent, London and Hertfordshire.

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.